Quick Summary: Established in two decades, outsourcing is a perceived controversial business cooperation model that is now known as a well-known business practice that is utilized by many companies across the globe. Counting its stability, software outsourcing services are still relevant for those companies who want to incorporate this practice in 2023 and beyond. In this article, we will discuss how outsourcing has come so far and what is the future of software outsourcing services for making corporate firms successful.
The industrial revolution is changing the global technology landscape rapidly. The digitalization waves are making companies take advanced steps of competition and find many resources that are quickly scaling the business. While outsourcing software development services have thrived which led to significant reductions in operational costs, which was completed by an in-house team taking much time.
However, the flexible outsourcing models are carrying complicated initiatives that had language barriers and cultural nuances that added more complexities. Statista predicts that global market expenditure on IT Outsourcing Services will reach $519.3 billion by 2023, exhibiting a global growth trend.
Apart from being less expensive and having vast talent pools, the software outsourcing services have been competitive and consolidated through their market positions. Moreover, an effective transition for software development has helped many organizations unlock their true value as they have started outsourcing their services.
Before you dive into deciding whether to outsource software development services or keep it with an in-house development team, you need to know this important statistic.
Statistics About Software Development Outsourcing That Are Relevant
- According to Statista, the worldwide outsourcing industry was worth $92.5 billion in 2019 and is expected to grow to $498 billion by 2021.
- Deloitte conducted a survey which revealed that almost 64% of IT executives are planning to increase their outsourcing budget in the coming years. The reason behind it is access to specialized expertise, cost-cutting, and increased flexibility.
- Additionally, according to Grand View Research, the software development outsourcing industry would increase at a CAGR of 4.4% from 2020 to 2027. Including in this report the demand for digital transformation increased due to the rising popularity of cloud computing and the need for cost-optimization which are primary drivers of the outsourcing market’s growth.
What Were The Three Existential Phases Of Software Development Outsourcing?
Phase: 1- Existence
From the early 1980s through the late 1980s, software development outsourcing underwent several transformations before becoming a common practice. The mainstream business concepts like freelance cooperation or startup investment emerged having the same goal- financial benefits. However, traditional software outsourcing conducted its operations by hiring a third-party supplier.
Phase: 2- Strategic outsourcing
This phase involves delegating strategic business processes to external providers. The majority of a company’s work is assigned from a business standpoint, and the primary purpose of strategic outsourcing is to gain a competitive edge by utilizing third-party resources, growing internal capabilities, and improving procedures.
Phase: 3- Transformational outsourcing
This stage represents technological advancements and rapidly changing business needs that have to be done by expanding the business with multiple operations. Transformation outsourcing ensures flexibility for adopting tech innovations, building long-term partnerships,s and delivering high-quality results.
Models Of Collaboration For Software Development Outsourcing
Companies employ a variety of collaboration methods when outsourcing software development projects, including
|Time, and Material||In this model, the vendor is payable for the time and material when the project is completed. The project is worked on by the outsourcing IT service provider, who charges for the actual hours worked and materials used.|
|Fixed cost||A fixed cost is applicable for the onset of a project. Hence, the software development outsourcing company must provide a project that is an agreed-upon budget and timeline. The key advantage of this strategy is that the client may forecast the overall cost and budget ahead of time.|
|Dedicated team||Hiring a dedicated team implies employing app developers who will exclusively work on your project. The software development service provider is responsible to equip the team with needed tools, infrastructure, and resources if needed.|
|Project-based model||Project-based outsourcing model includes a team that handles the entire project independently.|
|Managed teams’ model||In this model, the in-house app development team and outsourcing company shared the responsibilities together. The clients can discuss everything they want with the team.|
|Dynamic pricing||The service providers leverage dynamic pricing models as pay-as-you-go payment methods.|
Process Of Software Development Outsourcing
Although, everything is dependent on the software development outsourcing provider and the type of collaboration, the conventional procedure includes the following steps:
Create the project specifications
This is the first step of software outsourcing services that includes knowing the project requirements, client’s goal, timeline, and budget.
Choose a reputable seller
After the project requirements are established, it is important to choose a software development service provider who meets the expectations of the customer. Moreover, it also includes researching companies and reviewing their portfolio and testimonials will be helpful.
Negotiate the contract
In this step, the contract between the outsourcing software development service vendor and the client is been signed. The agreement should clearly carry the outline of the project scope, deliverables, timelines, and payment terms.
Plan the project
Once the contract is signed, the outsourcing company will assign a project to a manager or work with the client and manage the project. It includes defining project timelines and tasks.
The development stage includes software coding and programming. In this stage, the company will use agile development methodologies for ensuring that the project stays on track and meets the client’s goals.
After the development of software, a thorough test should be run to ensure that the specifications are up to clients’ needs. Furthermore, the software should be bug and error-free. In case of any emerging issues, the outsourcing software development service provider is supposed to fix them in a fast and efficient manner.
Once the software has been tested and approved, it can be deployed to the client’s server.
Maintenance and support
The reputation of the company stays if it provides support. The software outsourcing service provider ensures that the software functions continuously and meets the client’s needs.
How Is The Future Of Software Outsourcing Services Changing Business Operations?
Business operations have truly changed their ways as software outsourcing services have transformed their way of operations that allowed them to stay competitive in the ever-evolving landscape. However, the future of software development services holds great promise in changing business operations.
So, let’s dive into dept for the understanding of business operations.
Changing Patterns in Software Outsourcing
The customer’s tastes are changing constantly and it’s time for businesses for adopting new techniques for meeting the changing needs of customers. As outsourcing IT services work on many projects, the strategy of app development is better understood by them.
The future of outsourcing software development can assure you of these benefits:
Business is increasing their outsourcing as it is cost-saving and strategic which helps to achieve long-term goals and gain a competitive edge.
Partnerships for Integration
The benefits of outsourcing software development services have witnessed a shift in which more integrated partnerships and outsourcing vendors become trusted advisors and strategic partners that were actively contributing to business strategies and decision-making.
Engagements That Produce Results
The future of software outsourcing services is committed to delivering results through flexible outsourcing models such as outcome-based pricing and value-based partnership which aligns with your business interest. Moreover, the team goes ahead to achieve perceptible business outcomes.
Preparing for digital transition
With developing technologies such as AI, ML, IoT, Blockchain, and Cloud Computing, the app development landscapes are evolving. It becomes essential to advance business with future-ready technologies. Here, the role of software outsourcing services becomes important which helps businesses to integrate such technologies into apps.
Acceptance of Digital Transformation
The future of outsourcing software services plays a pivotal role in helping businesses for navigating and accelerate digital transformation initiatives. It enhances advanced technologies that bring innovation, optimizes processes, and increases customer experience.
Technology in Development
The company will capitalize on developing technologies such as Artificial Intelligence (AI), Machine Learning (ML), Blockchain, Augmented Reality/Virtual Reality (AR/VR), and Quantum computing, which will totally disrupt the sector and open up new economic prospects.
Agile Development Methodologies
The integration of DevOps and Continuous Integration/Continuous Delivery (CI/CD), becomes more integral in the approach of the agile development process. It enables companies to achieve faster time to market, improved quality, and greater flexibility.
Global Talent Access and Smooth Collaboration with the Right Team
According to a poll, there are around 5 million programs accessible on the Google Play and Apple App stores. By hiring a software development company, an app with seamless functionality, engaging UI, and a powerful backend. If you take software outsourcing services in the future, they can help you in,
Global Talent Availability
The business can get unparalleled access to a wide range of talent pools worldwide. This service can be used if firms need special talents, domain expertise, and industry knowledge.
Ecosystems that collaborate
The outsourcing partnership evolves into collaborative ecosystems, where business involves many outsourcing providers, freelancers,s and domain experts by fostering innovations, cross-pollination ideas, and excellent resource allocation.
Integrated Teams and Remote Work
In this era of the rise in remote work and virtual collaborative tools, the outsourcing landscape is reshaped. The business will cooperate with a distributed team that will enable seamless communication between different time zones, leaping cultural boundaries and geographical constraints.
Better Data Security and Risk Management Via Software Outsourcing
The major concerns like privacy and data security are increasing for businesses, as technology is becoming more advanced. There is a constant need of investing in security tools, if businesses are trying to achieve to-the-date security with an in-house team. If you hire a trusted software outsourcing company it ensures,
Data Protection and Privacy
Outsourcing services place huge importance on robust data security measures, compliance with regulations, and protection of intellectual property as data is becoming more critical. Businesses are tracking more records in data security and tough security standards as they seek more outsourced providers.
If an outsourcing relationship is formed, risk management measures will handle possible risks such as vendor lock-in, geopolitical concerns, and supply chain disruptions. The diverse outsourcing locations and contingency plans are becoming imperative.
Software outsourcing services are altering corporate operations in the future
Those days are no more when the apps are developed by outsourcing teams. Moreover, the future of software outsourcing services will help in achieving this.
Businesses can optimize resource allocations by leveraging external expertise by enabling software outsourcing services. However, it allows the internal teams to focus on core competencies and strategic initiatives.
Scalability and flexibility
The businesses can be easily scaled up and down quickly on the basis of market demand. Moreover, it even doesn’t incur any vital overhead costs. Due to this flexibility, organizations can swiftly adapt to the firm’s environment.
The future of outsourcing will bring a culture that is adapting to changing innovation. It will allow businesses to tap into expertise and provide cutting-edge technologies. However, it drives product and service enhancements.
The above were the main reasons for hiring a software development company that provides promising services and business growth.
Important parameters to keep in mind while outsourcing software development companies in the future. Also, we have included some additional advantages of outsourcing software development services below.
Additional benefits of software outsourcing services
There are several advantages and prospects for growth that seek to transform corporate processes. Let’s now discuss in detail how software outsourcing is transforming business landscapes.
When an in-house team is hired, they usually have enough work on their plate. However, the approximate annual salary of hiring a full app developer is higher than outsourcing development services which start from $25 to $50/hr.
|Country||Jr. App Developer||Intermediate Level Developer||Sr. Level App Developer|
|US||$65,000- $90,000||$90,000- $120,000||$120,000-$150,000|
The business can acquire major savings, if they outsource software services that hold high potential in revolutionizing business operations. The evolution of outsourcing landscapes unlocks new opportunities for businesses that let to sustainable growth and increase the competitive global market.
Increase in market-time
As per a survey by Deloitte, 59% of respondents agreed to outsource their time-to-market. While you outsource software development services, it gives access to an entire team of developers that includes UI/UX developers, Quality assurance engineers, business analysts, and project managers.
Moreover, it allows the business to lessen the product development lifecycle which brings new products and features into the market faster.
Increase scalability and flexibility
The businesses get the ability to scale the operations quickly, whether it’s up or down or based on project requirements or market demand. Outsourcing services add an edge that provides flexibility in engaging more developers that aligns the development process and completes the project within the deadline and with no-compromised quality.
The above benefits assure that the software outsourcing services’ future is quite promising.
We will now discuss the important parameters to keep in mind while taking outsourcing software development services.
Essential Factors To Keep In Mind While Outsourcing Software Development Services
Outsourcing your project is an excellent decision but before you step into a software development market, it is important to shortlist the profile by keeping a few parameters in mind.
These parameters will allow you to narrow down the options available to collaborate with the best teams. Here are the best key considerations.
Skills and experience
You should be sure that the software outsourcing services you take have enough skills and experience in a specific technology stack, domain, or industry-related project. You can request a portfolio of project client testimonials and case studies to better understand customer satisfaction and the nature of work.
Cooperation and Communication
Communication is the most critical aspect of outsourcing. The company’s communication methods, availability, and responsibilities should be evaluated. Furthermore, the company should be available 24*7 for anytime communications via mail, chats, or any other medium.
Social and Verbal Compatibility
The social and verbal communication between you and the outsourcing company should be clear to avoid communication gaps. Hiring a software development company that has professionals in native languages is a plus, as no significant barriers affect understanding the project requirements.
The software outsourcing service provider should have the technical capabilities of delivering the project on time and within budget. You should investigate the company’s development process, quality assurance methods, and project management methodologies.
Scalability and team size
Make sure that the outsourcer you hire has enough team to handle your project that can be scaled up and down or whenever needed.
Hiring a software development company should be such, that it values your work culture. However, you should select a vendor who understands your business needs and works in accordance with you.
Ask for the reference of work the outsourcing company did for their previous client. It will provide you with information about their working style, quality, professionalism, and capacity to deliver on their commitments.
The prices to outsource software development services should be compared between shortlisted vendors and choose a reasonable balance between quality and costs.
Security and Confidentiality
When choosing software outsourcing services, data security and intellectual property are important. Nonetheless, it is preferable to choose a firm that prioritizes security procedures, data protection measures, and readiness to sign NDAs or private agreements.
Balance Between Quality and Cost
Cost should not be only the sole determining factor. Companies should never compromise quality when it comes to costs. Moreover, pricing models such as set price or time and material should be assessed in terms of quality, competence, and timely delivery.
Service Level Agreements (SLAs)
SLAs should be clearly specified in order to create clear expectations for project milestones, deliverables, deadlines, and support services.
Check the geographical location of outsourcing companies to access the advantage and disadvantages of related time zone differences, travel requirements, and cultural alignments.
If you keep these characteristics in mind, you will be able to effortlessly engage with the software outsourcing service provider that best meets your needs.
Problems Associated With Software Development Outsourcing
A coin always has two sides to it. Although, there are many benefits that an outsourcing company provides, yet; there are even many threats that you should be aware of:
When you outsource a software development company it may result in communication risks, especially when there are language or cultural barriers. Moreover, miscommunication can lead to delay, misunderstanding, and many errors
How to overcome it?
- Set clear communication channels and protocols.
- Mostly communicate by using video conferencing tools and many other communication technologies for facilitating high-end communication.
- Make sure that the software outsourcing service provider understands the company’s culture and values well.
When you outsource software development services it may result in quality risks, especially when the company is located in different countries and are having different time zones. Due to it, the delivery of the solution might not meet the standard that is required by the client.
How to overcome it?
- Develop a quality control plan that matches the standards and procedures.
- Keep regular monitoring of software outsourcing service providers’ performance for making sure it meets the required standards.
- Set a clear communication channel between the company and the vendor.
There are many security issues that have to sorted out at the initial stage while hiring a software development company, especially when the data is been shared with the outsourced team. It results in data breaches or leaks.
How to overcome it?
- Create a security plan that matches the security measures.
- Develop background checks on software outsourcing service providers to make sure that the company’s past reputation is good and has no history of security breaches.
- Sign an NDA, with the outsourcer for protecting the company’s confidential information.
In many cases, the software outsourcing provider doesn’t deliver the results they are about to. However, the company ends up spending more money on fixing the problem or finding a new outsourcing provider.
Effective Software Development Outsourcing Strategy
There are several key factors that need to be considered while developing an outsourcing IT services strategy. We have mentioned a few steps that have been an effective strategy for finding an outsourcing company.
Establish your objectives
Determine the particular goals that will allow you to attain software outsourcing services. If you are looking for reducing costs, improving quality, expanding capabilities, or making your internal staff focus on important aspects of the project. if you define your goals, it will be very helpful for the success of your initiatives.
Acknowledge the areas to outsource
The next step is to research best areas where software outsourcing businesses are best suited. Consider functions or tasks that are not-used or skills that are not available majorly. Also, give attention to areas that are time-consuming or low-valued but critical to success.
Set a budget
Your software development outsourcing strategy should be similar to your budget. Consider how much you are able to spend on software development outsourcing and the potential returns on investment.
Selecting outsourcing partners
Research and shortlist software development partners that have proven track records and extensive experience. Moreover, they should have delivered a successful project a plus point. The partner should be located in a considerable geographical location and can tackle any language or cultural difference.
Establish a reliable communication plan
Communication is an important key to the success of any software outsourcing initiative. Select an appropriate communication channel that discovers no glitches and your entire requirement can be well understood by the company.
Once the software outsourcing partner is selected, it is important to check their performance to ensure that it meets your expectation. Provide explicit measures for monitoring their performance and tracking their growth.
Select and adjust
The final step is to adapt your software development strategy as needed. Keep accessing your outsourcing initiatives to ensure that they meet your objective and have a positive impact on your business. Make adjustments according to requirements that are well-optimized to achieve your outsourcing strategy and goals.
Best locations for software development outsourcing?
It is not an easy task to determine which location is having the highest level of software engineers that are capable of developing a dynamic development team that meets your requirements.
Whereas, the locations may vary in terms of technical skill set, English education, and cultural compatibility.
It is the most attractive destination as has cheap labor. According to reports by Business Insider, there are only 130 million of them approximately 1 billion people speak English in Africa.
This continent is well-known for its continuous adaption, cost-effectiveness, English proficiency, and quality results.
This nation is highly developed and its native is English speakers. It is a very sought outsourcing destination, however, the high labor costs may restrict its development potential.
The US is known worldwide for its advanced and cutting-edge economies, hence; outsourcing here makes sense. While the high salaries force the company to look overseas when hiring app developers.
This destination is mainly preferred for nearshoring partnerships due to its geographical proximity ensures time zone compatibility and has excellent engineering skills.
Due to its high level of technical education and English language skills, Europe’s Western countries are a selected location for outsourcing.
Hiring a software development company that is based in Eastern or Central Europe due to its well-educated developers and native English speakers.
How Will Software Development Outsourcing Be Looking In The Next Decade?
Although it is not that easy to predict how software development outsourcing will look in the next decade but business outsourcing depends upon various factors such as technological advancement, economic and political trends, and changing consumer demands.
However, we have listed a few influential people that could shape the future of software development outsourcing.
Enhanced usage of automation
The rapid development of artificial intelligence and automated technologies is in demand. Yet, business tasks can complete complex tasks that cannot be automated. As a result, there is a shift in traditional outsourcing models that provides specialized services.
The huge importance of security
As cybersecurity risks mount, software development outsourcing firms will deliver more comprehensive protection.
Focus on sustainability
The growing climate changes are a great challenge for businesses. It’s good to prefer an outsourcing provider that prioritizes sustainable business practices and social responsibility.
Expanding outsourcing to a new location
New destinations like South America and Africa are taking place in hiring IT app developers, as technology is making collaboration easier across borders and time zones.
In the future of software outsourcing services, firms will choose partners who offer value-added services in addition to standard outsourced offerings, such as strategic advising and user experience design.
Bigscal- The Future Of Software Outsourcing Services
Well, you are in the right place at the right time! Bisgcal leverages best industry practices that empower businesses with next-gen software solutions that are tailored to unique business needs. As a software development outsourcing firm, we have assisted hundreds of thousands of startups, corporations, CTOs, and organizations of all sizes in developing software. We assist you in transforming your digital experience.
We help to transform your digital journey. Whether your motive is to save costs, develop a state of art software or speed up development, we have proven expertise and gained lots of appreciation. By choosing us for outsourcing custom software development services, you can get your project ready with talented experts, high-quality codes, and speedy development.
Concluding it, software outsourcing services are moving towards more automated and value-added services by using advanced technologies and security practices. They should adopt agile development methodologies that adapt with the changing project needs, by ensuring timely and efficient delivery without quality compromise.
How can project timelines be managed and timely delivery can be attained?
If the software outsourcing service provider follows agile development methodologies, such as Scrum or Kanban, effective project timelines can be managed. Moreover, the crew should be spread by splitting the project down into smaller, achievable tasks with set deadlines.
How do outsourcers handle communication and collaboration with remote teams?
If you outsource software services they should provide effective communication in a remote setup. Real-time communication tools such as video conferencing, project management systems, and instant messaging platforms should be employed. Moreover, the team should be handled by a project manager who makes a smooth collaboration and on-time responses to queries.
What should be the approach toward scalability and handling of increased project demands by outsourcing companies?
Outsourcing companies should use a flexible resource allocation model that allows scaling up or down a team based on project demand. Furthermore, the changing requirements should be understood by the team quickly to ensure timely delivery without quality compromise.
Does the outsourcing company provide support and maintenance after the completion of the project?
Yes, the company provides various support and maintenance services. The support option includes bug fixing, feature enhancement, and system upgrades that ensure the continuous smooth operation of the software. Moreover, the support should be customized as per clients’ needs and budgets.